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If you lost money in the stock market due to your broker’s misconduct, your claim will likely be handled by the Financial Industry Regulatory Authority (FINRA). FINRA states that it is the largest securities dispute resolution forum in the world, handling 99% of all securities arbitration claims involving customers of brokerage firms.

Here at the top ten most common claims filed for FINRA arbitration in 2012*:

Breach of Fiduciary Duty

These claims arise when your broker or registered investment advisor violates the trust and confidence you placed in them. The degree of fiduciary duty owed by different investment professionals varies, and potential revisions to fiduciary duty standards have recently been under review by FINRA.

Negligence

You may have a claim for negligence against your broker if the broker fails to comply with industry standards, or fails to act as reasonably prudent broker under the circumstances.

Misrepresentation

Your broker’s recommendation must have a reasonable basis in fact. If it doesn’t, you may have a claim against your broker for misrepresentation. Often this claim arises when an investor is peddling a rumor or “hot tip.”

Failure to Supervise

A brokerage firm has a responsibility to supervise its brokers—particularly if the broker has a record of prior misconduct. You may have a securities claim if you suffered losses as the result of your brokerage firm’s failure to supervise its broker. You can research your broker’s professional background at http://www.finra.org/Investors/ToolsCalculators/BrokerCheck/

Breach of Contract

You and your broker typically enter into a Customer Agreement that requires the broker to comply with the rules of exchanges on which the broker trades. This means you may have a breach of contract claim against your broker if you suffer losses as a result of your broker violating exchange rules.

Omission of Facts

A claim for omission of facts arises when a broker fails to disclose a material (important) information involving a security.

Unsuitability

You may have a unsuitability claim if you broker executes a trade on your behalf without having reasonable grounds for believing that the recommendation is suitable for you based on your other holdings, financial situation, and financial needs. In some instances, before making a trade on your behalf, brokers are required to obtain information from you regarding your financial status, tax status, investment objectives, and other information that would reasonably be required when the broker recommends the trade.

Unauthorized Trading

Unauthorized trading occurs when a broker makes a trade without your permission or sends a confirmation in order to cause you to accept a transaction to which you had not actually agreed.

Churning

Churning is excessive activity in your account, often perpetuated by a broker to generate commissions.

Margin Calls

A margin call occurs when the broker requires you to deposit additional funds to cover a position you have created on margin (by borrowing). If you fail to comply with the margin call, you broker will likely liquidate your holdings to satisfy the margin requirements. Claims arise when the account was placed on margin without your authorization, or if the risks of margin were not properly explained to you.

Meet Mark

Attorney Mark C. Santi combines his experience as an aggressive and successful commercial litigator with a long-time passion for finance and investments. In doing so, he provides investors with clear, practical, results-driven representation for recovering their investment losses.

Mr. Santi is licensed to practice law in Minnesota, New York, and Florida and represents investors nationwide. He has extensive experience in business law and commercial litigation, including work on a high profile multi-billion-dollar securities lawsuit.

Mr. Santi graduated with a B.S. in Economics and Political Science from the University of Wisconsin-Madison. At UW he was inducted into the Iron Cross Society which is considered the highest honor an undergraduate can receive at the University. Mr. Santi graduated from the University of Miami-School of Law with a Juris Doctor degree. At Miami Law he received awards for outstanding performance and pro bono services for those in need, and was inducted into the Society of Bar & Gavel where he ultimately served as its President.

This site is educational information based on general legal principles. Specific facts can and often do drastically change legal results. You should not rely on this information except as a trigger to contact your attorney and obtain advice specific to your circumstances. By using this site, you are agreeing to our Terms of Use.

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